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US: December lift-off expectations cemented by jobs report – ING

FXStreet (Delhi) – James Knightley, Senior Economist at ING, suggests that after the stronger than expected NFP data, the prospect of a 25bp rate hike on 16 December looks good.

Key Quotes

“US non-farm payrolls rose 211k in November versus a consensus forecast of 200k and an upwardly revised 298k reading reported for October (there were 35k upward revisions to the past couple of months’ data).”

“The details showed manufacturing falling 1k and mining falling 11k, but elsewhere the numbers are strong. Construction up 46k, services up 163k with retail up 31k and professional services up 27k.”

“Meanwhile, the unemployment rate remained at 5.0% while average earnings growth came in at 0.2% MoM, resulting in a slight drop in the annual rate of wage growth to 2.3% from 2.5%. This should be a temporary drop as favourable base effects mean that if we get another 0.2% MoM rise next month the annual rate will jump back up to 2.7% YoY. The participation rate also rose. The only disappointment was a one-tenth increase in the underemployment rate to 9.9%.”

“Given Janet Yellen last Thursday suggested payrolls growth of “under 100k per month” would be enough to absorb new entrants into the labour force, last Friday’s report is surely consistent with the FOMC trigger clause for higher interest rates of “some further improvement in the labor market”. It should also mean that the Fed can be “reasonably confident that inflation will move back to its 2 percent objective over the medium term”.”

"In terms of the next key data releases we expect retail sales set to show respectable growth of around 0.5% MoM while headline consumer price inflation is likely to rise on 15 December as the effects of last year’s plunge in the oil price starts to drop out of the annual comparison.”

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